Chris Prandoni

This is why conservatives are fighting for for-profit colleges

Posted by Chris Prandoni on Thursday, June 9th, 2011, 2:44 PM PERMALINK

This post is a response to CNBC’s John Carney

ATR opposes all federal education loans. If we had it our way these programs wouldn’t exist at all. ATR has and will continue to advocate for a reduction and elimination of federal education loans. The Department of Education estimates that in 2011 they will authorize direct loans totaling $116 billion. If that wasn’t bad enough, the government, via the Federal Family Education Loan program, backs loans issued with private capital. According to the Congressional Review Service, there are approximately $450 billion in FFEL loans outstanding and due to be repaid in the coming years. These programs, undeniably, need to be scaled back and eventually eliminated.

However, these programs do exist. The gainful employment rule that ATR opposes does nothing to reduce the amount of money the government spends on education or education loans. The misconception that once students will no longer be able to receive federal loans to attend certain for-profit institutions, the government will use the money to pay down the debt or give Americans a tax cut is wishful thinking.

When has a federal agency not spent money appropriators already allocated to it?

What the gainful employment rule does is further skew an already skewed market, America’s higher education sector. ATR believes that every college—private, public, or for-profit—should be able to compete for students that receive federal loans. The gainful employment rule creates obstacles for certain colleges to jump over but not others—this is what ATR finds problematic.

ATR’s requested Securities and Exchange Commission (SEC) investigation about the gainful employment rulemaking process is an entirely different issue. Thanks to diligent investigative work from the Citizens for Responsibility and Ethics in Washington (CREW), there are warranted concerns that hedge fund managers’ manipulated for-profit schools’ stocks in order to short sell them. In addition to CREW, Senators Enzi (R-Wyo), Burr (R-N.C.) and Coburn (R-Okla.) have also called for SEC investigations.

It is unfortunate that these federal spending programs exist. ATR also bemoans the existence of public schools, teachers unions, and Obamacare—but that doesn’t mean we won’t work to mitigate the negative effects of these bad policies or institutions.

More from Americans for Tax Reform

Top Comments

Secretary Duncan Misses Opportunity to Answer Gainful Employment Concerns

Posted by Chris Prandoni on Tuesday, June 7th, 2011, 2:56 PM PERMALINK

Not even trying to hide the partisan intent of the Health Education Labor and Pension (HELP) under Sen. Harkin’s leadership, today’s committee hearing was titled Drowning in Debt: Financial Outcomes of Students at For Profit Colleges. This is not the first time Sen. Harkin (D-Iowa) has convened the HELP committee to help grind his axe with for-profit colleges, and will likely not be the last. Given the intent and witness list for today’s  hearing it is not surprising that Senate Republicans did not show up. What would have been the point?

The seemingly endless hearings and subsequent fuss is over the Department of Education’s (DOE) gainful employment regulation. In short, the DOE reinterpreted longstanding metrics regarding federal student aid, effectively barring students from attending for-profit institutions that did not meet new, arbitrary standards. Click here for a more thorough explanation.

Today’s hearing may have been worthwhile if DOE Secretary Arne Duncan had showed up, as he was scheduled to. While the gainful employment rule is controversial in itself, the circumstances from which it originated are, as Sen. Tom Coburn (R-Okla.) said, “criminal.” There is ample evidence to suggest that DOE officials and non-profit education groups worked with Wall Street traders to write the gainful employment rule. This is problematic because traders—using what should have been proprietary information—short sold for-profit colleges’ stocks once they knew the gainful employment rule was going to be introduced. It is due to the potentially dubious communication between DOE officials and financial executives that Americans for Tax Reform President Grover Norquist urged the Securities and Exchange Commission Director of Enforcement Robert Khuzami:

“to investigate the Department of Education and the rulemaking process surrounding the “gainful employment” regulation. Such an investigation is necessary to determine whether or not Department of Education officials were complicit with short-sellers during the drafting of the gainful employment rule.”

Arne Duncan has been surprisingly silent about the events and circumstances leading up to promulgation of the gainful employment rule. Today’s hearing would have been as good a forum as any for Secretary Duncan to clear the air surrounding the controversial decision. The Secretary’s absence was a missed opportunity and certainly raised some eyebrows from Republican senators who were looking forward to engaging the man charged with running the Department of Education. Until this happens, a dark cloud will remain over the Department of Education and its controversial rulemaking.  

More from Americans for Tax Reform

Top Comments

Private Higher Education Crippled by Gainful Employment Rule

Posted by Chris Prandoni on Thursday, June 2nd, 2011, 2:42 PM PERMALINK

The Office of Management and Budget (OMB) today published the now infamous “gainful employment” rule, written by the Department of Education. This new rule, which emerged amidst a cloud of scandal and controversy, places incredible and unfair burdens on the nation’s bustling for-profit higher education sector.

It requires that for-profit schools meet at least one of three criteria for their students to qualify for federal aid: at least 35% of graduates must actively be paying down their loans; graduates must spend less than 30% of their discretionary income on paying off loans; finally, graduates must spend 12% or less of their total income on loan payments. Fail to pass one of these tests three times in four years, and the school must close its doors for good.

Enrollment in for-profit education institutions has skyrocketed nearly 418% since 2000, and for good reason. Tuition averages about $10,000 per year less than private not-for-profit schools. These innovative schools consistently lead the way in online education and cater to the needs of local employment markets in ways that traditional schools do not. Notably, and most importantly, these institutions serve a distinct demographic. Minority students constitute 45% of for-profit colleges’ total enrollment compared to 33% and 27% for public and private non-profit colleges, respectively.

Eliminating choice and competition is hardly an effective way to ensure opportunity for so many that are traditionally shutout of higher education. Colleges enrolling mostly minority students are more likely to demonstrate loan re-payment rates in the new rule’s restricted zone, and would likely be forced to close their doors. Realizing the implications of the new gainful employment rule, 289 members of the House of Representatives, including 58 Democrats, voted in February to block funding for its enforcement. The Senate, however, rejected the plan.

Further muddying the water, the circumstances surrounding the rulemaking are shrouded in controversy. Back in February, Citizens for Responsibility and Ethics in Washington (CREW) asked the Securities and Exchange Commission (SEC) to investigate a known Wall Street short-seller, Steve Eisman. Eisman testified before the Senate HELP committee arguing for implementation of the gainful employment rule despite having no expertise in education policy. Even more problematic, a FOIA by CREW revealed that Eisman was in close contact with Education officials and may have even helped write the new gainful employment rule.

This is especially troubling since Eisman and other financial firms bet that for-profit schools—publically traded companies—stock price would plummet, a practice called short-selling. DOE is yet to sufficiently address the elephant in the room—why were they working so closely with Eisman and others who stood to profit from the gainful employment rulemaking.    

On April 28, DOE’s Office of Inspector General launched a probe into the possible influence of Wall Street short sellers on the rule. Despite this probe and serious questions left unanswered the Office of Management and Budget codified and published the gainful employment rule. The haste at which this rule was rammed through is disconcerting, especially given the warranted allegations from Senators, Representatives, and non-partisan outside groups. Until the dust settles and Americans concerns are alleviated, DOE should suspend implementation of the gainful employment rule. Anything else would be imprudent.  

Originally published at

More from Americans for Tax Reform

Top Comments

Government Employees Overpaid by $468 Billion Each Year

Posted by Chris Prandoni on Thursday, May 19th, 2011, 9:23 AM PERMALINK

[PDF Document]

Government employee compensation is low hanging fruit for politicians looking to rein in government’s overspending problem. Unaffected by market forces, government agencies need not abide by traditional business practices. This problematic arrangement manifests itself when one compares state and federal worker compensation to similar private sector compensation.   

State and local employee overpayment [1]                                                                          

State and local government employee compensation


Comparable private sector Compensation


Amount state and local gov employees are overpaid


Number of state employees

19.5 million

Total overpayment


Federal employee overpayment

Federal employee compensation


Private sector employee compensation


Amount federal employees are overpaid


Number of federal employees sans postal

2.2 million

Total overpayment

$136 billion

When controlling for factors such as education, age, experience, intangible benefits (job security) federal premium is: [2]

  • Federal employees' hourly wages are 22% more than workers in the private sector
  • Aligning federal workers' compensation with market rates would save taxpayers $47 billion a year
  • When combining wages and total benefits, federal employees earn 30% to 40% more than private-sector workers
  • Full-time federal employees can take 13 paid sick days a year along with all 10 days of national holidays
  • The average federal civilian employee earns on average $32,115 a year in non-cash compensation compared to a private sector employee who earns three times less, $9,882 annually
  • Federal employees receive 22% more in employer payments toward their health care than their private sector counterparts.
Click on the document above for a PDF copy

[1] Cato: Employee Compensation in State and Local Governments. January 2010

[2] Heritage: Federal Pay Still Inflated After Accounting for Skills. September 2010


More from Americans for Tax Reform

Top Comments

Fact Checking CAP's Characterization of Exxon's Tax Liability

Posted by Chris Prandoni on Monday, May 16th, 2011, 5:11 PM PERMALINK

Last week, the Center for American Progress published a misleading blog post in hopes of drumming up support for Democrats’ proposed tax hikes on oil and natural gas producers.

CAP’s statements are bolded and immediately followed by ATR’s rebuttal.

ExxonMobil Corp.'s robust balance sheets have become a poster child for what The New York Times dubs the “paradox of the United States tax code.” The company’s large 2010 profits allowed them to lead Fortune 500’s annual ranking of the nations’ most profitable firms for the eighth time in a row. But the oil giant’s average effective tax rates are roughly half the 35 percent tax rate that currently stands as the high-water mark for American corporations.

CAP is deft at cherry picking data. The 17.6% effective tax rate for three years is 32% when looked at over six years. If CAP is bent on using those dates, a more effective point of comparison would be to compare it to other corporations like GE, which received a $140 billion bailout during 2008 alone.

And even taking this 17.6% at face value, this number far exceeds the rates other large U.S. corporations have paid over the last five years.  According to The New York Times, Boeing paid a total tax rate of just 4.5 percent, according to Capital IQ. Southwest Airlines paid 6.3 percent. And the list goes on: Yahoo paid 7 percent; Prudential Financial, 7.6 percent; General Electric, 14.3 percent.

ExxonMobil and other big oil companies continue to exploit tax loopholes for nearly $4 billion in subsidies each year – intended write-offs for domestic production that were “intended for manufacturers, not big oil producers.”

Unlike other sources of energy, the government does not give American oil and natural gas companies a cent to produce oil or gas. The deduction “intended for manufactures” is actually what’s known as Section 199. 

Section 199 is not a special incentive for the oil industry.  It is a standard deduction that applies to all domestic producers – to movie producers, coffee roasters etc. and is intended to support job creation and retention in the US.  While the oil and natural gas industry employs only 6% deduction, nearly every other industry employs a 9% deduction.

Cites a new Tax Justice report which explains, “Over the past two years, ExxonMobil reported $9,910 million in pretax U.S. profits, but it enjoyed so many tax subsidies that its federal income tax bill was only $39 million -- a tax rate of only 0.4 percent.” Claims ExxonMobil paid no taxes at all in 2009 on profits of nearly $2.6 billion

This is an example of how CAP uses data out of context, leading to distortions.  The reason Exxon’s rate was only .4 percent is because they’d overpaid in prior years. Specifically, ExxonMobil’s income tax expense related to 2009 activities was approximately $500 million – and over the past five years, they incurred a total U.S. tax expense of almost $59 billion.

Even when Exxon had a record profit of $40 billion in 2008 due to record oil prices it had only a 31% effective tax rate.  That’s 13 percent lower than the maximum 35 percent despite being ExxonMobil’s fifth years as the top corporate earner. 

The math doesn’t add up here.  Either the authors made a mistake or they have engaged in fuzzy accounting.

There is a big discrepancy between ExxonMobil’s rates and those of most American breadwinners.  Their effective rate of 17.6 percent is nearly 16 percent below the average individual federal tax rate, which was 20.4% as of 2007.

The more complex answer is that there is a clear lack of understanding about who actually pays taxes in America.

Companies pay taxes while the actual burden of taxation falls on consumers, employees, and shareholders. Consumers pay taxes in the price they pay at the pump, employees pay taxes in lowered take home pay and investors—including pensioners, retirees, insurance recipients and other individuals pay in reduced dividends and capital gains. They then must again pay taxes on their dividends, capital gains, pension and annuity income or money derived from IRA, 401k plans and the like.

The burden of taxes, whether in the form of sales, property or income, ultimately falls on individuals. CAP is trying to pretend that some entity other than individuals ultimately pays the taxes.

Individuals in the highest quintile pay an average tax rate of just over 25 percent in the United States.  ExxonMobil pays approximately the same effective tax rate as Americans in the fourth income quintile –which includes Americans earning from $62,000 to $100,000 a year.

See point above. 

ExxonMobil’s accounting methods mask its relatively low effective tax rate.  Exxon counts part of its tax burden taxes that it simply doesn’t pay.

CAP arbitrarily ignores the taxes they don’t like – including payroll taxes.  Payroll taxes are a large part of operations and consequently a large part of the effective tax rate.

ExxonMobil now finds itself with the difficult task of publically rationalizing Exxon’s share of billions in subsidies, despite the company reaping enormous profits and paying relatively little in the way of taxes.

Exxon pays more in taxes than it receives in earnings.  In 2010, ExxonMobil’s total tax expenses in the United States were $9.8 billion, which includes an income tax expense of more than $1.6 billion. That $9.8 billion in taxes exceeded ExxonMobil’s 2010 U.S. operating earnings of $7.5 billion.

And over the past five years, ExxonMobil incurred a total U.S. tax expense of almost $59 billion, which was $18 billion more than it earned from its U.S. operations during the same period.

More from Americans for Tax Reform

Top Comments

Repeal Tax Credits, But Don't Raise Taxes

Posted by Chris Prandoni on Monday, May 16th, 2011, 3:36 PM PERMALINK

Originally posted at

Americans for Tax Reform asks every candidate running for Congress to sign the Taxpayer Protection Pledge, a promise to their constituents that they will not raise taxes on Americans or their businesses. The Pledge, signed by 235 Members of the House and 41 Senators, reads:

I___ pledge to the taxpayers of the state
Of___ , and to the American people that I will:
ONE, oppose any and all efforts to increase the marginal income tax
rates for individuals and/or businesses; and
TWO, oppose any net reduction or elimination of deductions and
credits, unless matched dollar for dollar by further reducing tax rates.

The Pledge is by no means a panacea to America’s tax and spending problems, it is a stopgap which identifies tax increases and looks to prevent them. It is the second clause of Pledge that has caused a limited fuss within the conservative movement and, thus, is worth reexamining. Before we proceed, it is important to make the distinction between two types of tax credits—refundable and nonrefundable—as conflating them can lead to unnecessary confusion. A tax credit is employed to reduce a taxpayer’s tax liability, ie reducing the amount of money they must pay to the government. A refundable tax credit allows the taxpayer to reduce their tax liability below zero, meaning the taxpayer is owed money from the government. The outlay effect caused by refundable tax credits is spending. Americans for Tax Reform has unambiguously opposed outlays resulting from refundable credits. I recommend readers take a look here at which refundable credits trigger these outlay effects.

The second type of tax credit, which is much more common, is non-refundable; it cannot reduce a taxpayer’s liability below zero. When conservatives argue for blanket repeal of these credits—or the non-spending portion of refundable credits—they are arguing for higher taxes—repealing these tax policies means more money for Washington’s appropriators. ATR has consistently advocated for the repeal of any number of credits, as long as repeal is offset with identical or greater tax cuts. Offsetting the repeal of energy tax credits and deductions is incredibly easy as most are worth a few billion dollars.

Why is offsetting the repeal of a tax credit, thereby preventing a tax increase, so important? Prohibiting tax hikes draws a line in the sand between supporters of big government and small government. Democrats have no interest in reducing America’s historic spending levels and will only do so when tax hikes are off the table. With the highest corporate tax rate in the world and a high personal income tax rate, raising rates is, thankfully, a heavy lift. Realizing this, Democrats pivoted and are now trying to raise revenue by repealing tax credits and deductions.

Although conservatives are arguing for repeal of particular tax credits and deductions for different reasons—namely market efficiency—they should of wary of supporting the Left’s unambiguous goal—more of your money. Once conservatives begin supporting tax increases through blanket repeal of tax breaks, it becomes enormously more difficult to prevent other tax hikes—like those proposed by the Simpson-Bowles commission, President Obama, and the Gang of Six.

ATR does not universally support or oppose tax credits, which is why we are opposing HR 1380, the New Alternative Transportation to Give Americans Solutions Act. Otherwise known as the Pickens Plan, the NAT GAS Act further obscures America’s already convoluted energy sector. To remedy the overregulation problem in America’s energy market, Congress should be looking to peel back policies that to skew consumer choice, not add additional complexity.

More from Americans for Tax Reform

Top Comments

Tell Congress to Oppose Tax Hikes on Energy Producers

Posted by Chris Prandoni on Sunday, May 15th, 2011, 4:22 AM PERMALINK

In response to skyrocketing gas prices and a stagnant economy, House Republicans have passed three bills which would expand America’s domestic oil production, creating jobs, spurring investment, and reducing America’s dependence on foreign oil. Unfortunately, with a Democrat controlled Senate, it is unlikely Majority Leader Harry Reid (D-Nev.) will allow a vote on these House-passed bills.

Conversely, Democrats have proposed legislation which would raise the price of gasoline by further taxing oil and natural gas producers! The recently introduced, and inaccurately named, “Close Big Oil Tax and Loopholes Act,” is nothing more than a billion dollar tax and will do nothing to alleviate Americans’ pain at the pump.  

More from Americans for Tax Reform

Even with skyrocketing gasoline prices, Dems introduce bill to raise energy producers' taxes

Posted by Chris Prandoni on Tuesday, May 10th, 2011, 4:01 PM PERMALINK

[PDF Document]

Attempting to feign fiscal austerity, Democrats have looked to raise taxes on America’s oil and natural gas producers. With the nation fixated on deficits and debt, Senate Democrats, unwilling to seriously cut federal spending, have introduced the inaccurately named Close Big Oil Tax Loopholes Act of 2011—legislation to repeal expensing deductions and necessary tax policies employed by American oil and natural gas companies.

Are oil companies the recipients of government subsidies?
No, the federal government does not give oil and natural gas companies a cent to produce oil. Unlike other forms of energy, oil and natural gas producers receive zero grants or loan guarantees, nor does the government impose any consumption mandates.

According to its cosponsors, why is this legislation necessary?
“The American people are demanding to know why they are stuck paying $4.00 for a gallon of gasoline …And they want to know why these oil companies should continue to enjoy billions of dollars in subsidies when the working class, the needy, and the elderly are being asked to sacrifice in order to balance the budget?”

  1. No one seriously thinks that raising taxes on oil and natural gas producers will bring down the price of gasoline. In fact, raising taxes on oil producers, makes producing gasoline more expensive
  2. These Senators are purporting to protect the same people they are raising taxes on, “the working class, the needy, and the elderly:” 27 percent of oil companies are owned by pension funds, 23 percent by individual investors, 30 percent by mutual funds, and 14 percent by IRAs. Only 1.5 percent of oil stocks are held by corporate management.

Summary of the bill
Modify foreign tax credit: In order to prevent double taxation, oil and natural gas companies are allowed to credit income taxes paid abroad from their US income statement. Senate Dems have proposed to limit the amount US oil companies can deduct, crippling American companies competing abroad.

Repeal Sec 199, only for oil companies: In 2004 Congress enacted Section 199, the domestic manufacturing tax deduction. Not trying to hide their bias, Senate Democrats are attempting to repeal Sec 199—which is employed by every domestic manufacturer—only for oil and natural gas companies.

Repeal or limit expensing: Consistent with the belief that taxes should be paid only on profits, oil and natural gas companies are allowed to expense some of the costs associated with drilling a well or the lease purchase.  

Supporting more than 9.2 million domestic jobs, America’s oil and natural gas producers are a pivotal part of the American economy. Repealing this industry’s expensing policies won’t put a dent in the deficit but will kill thousands of jobs and encourage Washington’s reckless spending habits.

More from Americans for Tax Reform

To Fund Bloated Government, Dems Target Oil Companies

Posted by Chris Prandoni on Wednesday, May 4th, 2011, 3:36 PM PERMALINK

This article was originally posted at

Unwilling to reign in Washington’s overspending problem, Democrats and their allies on the Left are stuck championing tax increases. Raising the corporate income tax rate—already the highest in the world—or increasing the personal income rate is untenable, leaving Democrats no choice except to try and repeal tax credits and deductions.

With oil and natural gas companies releasing their first quarter earnings this week, look for revenue hungry Democrats and to set their sights on this industry. First out of the gate is the League of Conservation Voters (LCV) which began asking Members of Congress to pledge to raise taxes on American oil and natural gas companies by eliminating a handful of pro-growth deductions. The LCV pledge reads:

“With five biggest public oil companies enjoying $60 billion in profits and Americans struggling with high gas prices, we should no longer force Americans to subsidize oil companies. I hereby pledge to end taxpayer subsidies and handouts for oil companies.”

Let’s cut through the hyperbole. Unlike renewable sources of energy which received $60 billion in taxpayer dollars since 2008, the American government doesn’t give oil and natural gas companies a cent to produce oil. The LCV’s characterization of tax credits and deductions as subsidies is intentionally misleading. A subsidy is when the government takes money from you and gives it to someone else, like a solar company. Allowing a company to keep more of its earned money by employing a tax credit is anything but a subsidy.

You would think from the LCV’s pledge that oil and natural gas companies pay virtually no taxes and are gaming the system for profit. This could not be farther from the truth: paying nearly $100 million a day in income taxes—and $300 billion in total income taxes between 2004-2008—the oil and natural gas industry’s effective income tax rate is 48 percent, compared to 28 percent for other S&P Industrial companies. And that’s just income taxes, those numbers don’t even include an additional $60 billion in non-income taxes or $350 million in excise taxes paid on petroleum products.

Furthermore, it is worth asking who profits when oil companies prosper. Apart from the 9.2 million people the industry employs, 27 percent of oil companies are owned by pension funds, 23 percent by individual investors, 30 percent by mutual funds, and 14 percent by IRAs. Only 1.5 percent of oil stocks are held by corporate management. This means that if you or your employer has been saving for retirement, well, you are likely part of Big Oil. Gasp!

And then there’s the matter of gasoline prices. As a commodity, oil prices are subject to speculation from investors who access global supply and demand. When you spend a dollar on gasoline, 68 cents from that dollar go towards purchasing the crude oil and 18 cents is used for refining and retailing. The remaining 14 cents is forked over to the government in excise taxes.

If Democrats really wanted to alleviate Americans’ pain at the pump, they could reduce the gasoline excise tax. Revealing their true intention, more revenue, Democrats are arguing for higher taxes on oil and natural gas companies—it is hard to imagine how further taxing oil and natural gas companies would bring down the cost of gasoline.

The truth is Democrats would rather demonize oil and natural gas companies than make necessary spending cuts. Leadership is making tough decisions about which programs to cut, bolster, or eliminate, not which companies to tax.

More from Americans for Tax Reform

Top Comments

GOP backs EPA into a corner, they come out...rapping?

Posted by Chris Prandoni on Thursday, April 21st, 2011, 12:49 PM PERMALINK

With the public increasingly frustrated with the EPA’s power grab, the agency is ramping up its pr efforts pushing back against Americans’ concerns about federal overreach…with a rap? Releasing “Click it—flip it,” a song that would make Vanilla Ice blush, the EPA’s new education campaign for children is as weird as it is inaccurate.

The MC warns listeners what is at stake, due to global warming, “the bears don’t even know when to take a nap. On top of that, it’s not cool, when the flood waters rise and mosquitoes rule.” Thankfully, we have the EPA to stave off the coming mosquito apocalypse where bears plagued with insomnia battle Kevin Costner for scarce resources.

Phew, thanks for looking out, EPA. So what should we do to stop Tyrannical Mosquitoes?      

“A 5 minute shower is all that’s needed to keep energy from being depleted. A long sleeve sweater is what I know will keep you toasted and the fuel bills low.”

Oh, that’s it?

And don’t forget, don’t ever forgot, to “click it—flick it, turn the handle to the right. Turn off the water push the handle real tight. Slip on some sneakers lace them up tight, leave the car parked you know that’s all right. Public transportation is the way to go you know, it’s one of the ways to keep emissions low.”

While showing a lack of creativity (the chorus’ rhyme scheme: right:tight:tight:right) even for federal bureaucrats, their creepy suggestions about how long children should shower for have nothing to do with what the EPA is really up to—regulating America’s energy companies and manufacturers out of business, and raising energy prices for every American.

Far from being an innocuous steward for the public good, the EPA is a politicized agency used to circumvent the will on Congress.   

Drop the beat, EPA!

More from Americans for Tax Reform

Top Comments